On 18 January 2015 the long-awaited modernisation package amending the Polish Competition and Consumer Protection Act entered into force. The changes do not relate to substantive law issues, but are bound to significantly change the dynamics of antitrust enforcement and merger control. This represents the most important update of Polish competition law since the country’s accession to the European Union in 2004.
The changes in antitrust enforcement are designed to bolster the detection of the gravest breaches of competition law, such as price-fixing cartels, quotas, bid-rigging and collective boycotts. These types of hardcore horizontal infringements, while posing the biggest threat to market competition, are also the most difficult to detect.
The experience of the Polish competition authority over the last decade has been that the vast majority of such infringements have been detected as a result of its leniency programme, where companies are given the chance to avoid fines in exchange for reporting infringements and cooperating with the investigation. The upcoming changes build on that, adding two new dimensions to the leniency programme.
First, the amendment introduces individual fines of up to EUR 500 000 for the senior managers responsible for hardcore infringements committed by the undertaking. It is not only intentional infringements that will give rise to this kind of liability; but also reckless lack of supervision. Although liability of this kind will be administrative, and will not create a criminal record, the high amount of a potential fine, combined with the five-year period for potential investigation under the statute of limitations, is designed to affect the conduct of individual managers and ensure companies adopt a more compliant culture.
However, the more important effect of this new sanction results from a new “asymmetrical leniency” programme combined with a five-year period under the statute of limitations. A leniency application submitted by the undertaking will automatically extend to its managers, but not vice versa. The five-year limitation period, which will start to run as of the beginning of next year after the manager’s departure, is designed to make the risk of a fine particularly serious for managers who retire or leave the firm. The Polish competition authority expects that this open, unmanageable risk of leavers submitting individual leniency applications with no effect for the firm will cause the companies to bolster their compliance policies and ultimately increase the number of leniency applications made by companies.
Secondly, the amendment introduces the “leniency-plus” scheme, aimed at those companies which failed to submit the first leniency application in the investigation. They will be offered a chance to have their fines reduced by 30% in the first investigation, if they submit a leniency application revealing another hardcore infringement (in this case being the first to report it, which would in turn give them the opportunity to avoid a fine completely in the second investigation). This is expected to result in a “snowball effect”, ultimately leading to the reporting of all hardcore antitrust infringements in the market of the affected parties.
As for merger control, the changes are expected to speed up the clearance of non-problematic notifications, and allow the competition authority to focus on the difficult ones.
The most important change is the introduction of a two-phase merger control investigation procedure. Simple cases will be dealt with during the month-long phase I. However cases which are complex, require a market study, and/or give rise to competitive concerns, will be moved to a four-month phase II. The decision of the competition authority to initiate a phase II investigation will not be subject to appeal, but will include a brief statement of justification.
In cases which give rise to competitive concerns, the competition authority will be required to issue a statement of concerns. Although this statement could be issued together with the decision to start phase II, it is widely expected that those decisions will most likely cite the complexity of the case and/or the need to conduct a market study as the reason, and statements of concerns will only be issued at a later stage of phase II. The modernisation package also provides for a formal structure for proposing conditions and obligations. Unfortunately, the procedure is very strict. If the competition authority’s proposal is countered by the party, and the new conditions and obligations are not accepted by the authority, there is no room for further discussion and a prohibition is issued automatically.
On the practical side, the modernisation package introduces significant changes to the method of calculation of turnover for the purpose of jurisdictional tests (although the thresholds themselves remain unchanged), and a new notification form is being introduced.
The changes to the Polish Competition and Consumer Protection Act are designed to bring the national system more in line with that in the EU but with a greater emphasis on deterrence by targeting individuals. It will be interesting to see what effect this has, and whether the risks of personal liability, which do not include criminal liability as has been adopted in the UK for example, will be sufficient incentive to bring about the change in compliance sought.